Recently, a significant acquisition transaction has been made in the field of medical technology, when the American medical device giant Edwards Lifesciences purchased the Israeli company Innovalve Bio Medical, a start-up company that grew out of Sheba Hospital, for the sum of 300 million USD. This transaction highlights the enormous potential inherent in innovation and patent development within public institutions (research bodies, hospitals, universities, etc.) and raises important questions regarding the rights of workers and the State in these inventions.
Service inventions: balancing the rights of the employee and the employer
The Patent Law, 5727-1967 (hereinafter: “the Patent Law“), constitutes the main legal framework that regulates the issue of ownership of employee inventions. Section 132 of the Patent Law deals with “Service Invention” and defines the conditions under which an employee’s invention will be considered the employer’s property.
The Patent Law defines a “Service Invention” as an invention that the employee arrived at as a result of his service and during his service. The interpretation of this term is critical, as it determines whether the invention belongs to the employer or the employee. The courts tend to interpret this term broadly, so that even inventions that were not developed directly within the defined role of the employee may be considered service inventions, and thus – will be considered the property of the employer. The Patent Law determines that an employee is entitled to compensation for a service invention unless he waived this right in an agreement with his employer. In public institutions, the height of the compensation is determined by the Compensation and Royalties Committee, which takes into account factors such as the employee’s role, the nature of the invention and the benefit derived from it.
Developments in the public and medical sector: balance between the rights of the employee and the State
In recent years, there have been significant changes in the management of intellectual property in public institutions, especially in the health sector.
The TAKAM directives (financial and economic regulations) have been updated to regulate the management of ‘knowledge products’ (which can also be referred to as knowledge-based outputs) in a more comprehensive manner. In our case in particular, this concerns provision 15, which deals with the protection of state assets, and specifically provision number 15.5.1 which deals with the management of knowledge products as mentioned[1]. It was determined that knowledge products developed in government hospitals or in health corporations are the property of the State, but the health corporations have been given extensive authority to manage and commercialize them. These provisions balance between the public interest and the need for commercial flexibility, while determining detailed mechanisms for the distribution of revenues from knowledge commercialization between the researchers, the institutions, and the State. Furthermore, complex issues such as the holding of shares in start-up companies and restrictions on additional work by researchers were regulated, with the aim of preventing conflicts of interest and encouraging innovation within the public system.
In addition, alongside the Patents Law and the provisions of the TAKAM, the Civil Service Regulations (“TAKSHIR”) provides specific instructions for civil servants[2]. Chapter 72 of the Civil Service Regulations defines a detailed mechanism for handling the inventions of civil servants. It obliges employees to notify each invention, whether it was created in the course of fulfilling their duties or not. The Inventions Committee, appointed by the Minister of Justice, is authorized to determine the state’s rights to these inventions and to decide on awarding prizes to the inventors. The Civil Service Regulations also regulates the manner in which patent applications are handled and the delicate balance between the employee’s rights and the interests of the State, while considering factors such as the employee’s role, the circumstances of the invention and the expected benefit from it.
Current challenges and a look to the future
The technological developments pose new challenges in the definition of “Service Invention”, especially in the era of remote work and the use of digital resources. In light of the complexity of the issue, it is very important to have early agreements between the employees and the employers, which clearly define the intellectual property rights and the compensation arrangements. While in the public sector there are specific provisions such as the Civil Service Regulations and the TAKAM (financial and economic regulations), many private companies adopt their own royalty mechanisms to encourage innovation among their employees. As technology continues to develop, there will be a need for constant adjustment of the legal and organizational framework to maintain a balance between the interests of employees, employers and the general public, as well as the ability of employers to attract attractive employees.
Summary
The existing legal framework tries to balance the rights of the workers, the interests of the State and the need to encourage innovation. However, while the basic legal framework remains stable, rapid technological developments pose new challenges in defining “Service Invention” and determining intellectual property rights. Issues such as remote work and the use of digital resources require a rethinking of the existing frameworks.
For civil servants and public institutions engaged in research and development, it is recommended to be well acquainted with the provisions of the law and the relevant regulations, and to seek legal advice in case of questions or disputes regarding rights to inventions.
[1]https://takam.mof.gov.il/document/H.15.5.1
[2] https://www.gov.il/BlobFolder/policy/takshir_full/he/takshir-full.pdf, Page 851
For further information please contact:
Hanan Efraim, Adv. Ofer Inbar, Adv.
Office: 03-691-6600 Office: 03-691-6600
Email: hanan@ekw.co.il Email: ofer@ekw.co.il